Central bank money can be used for which type of transactions?

Central bank money serves as the primary medium for settling transactions within the banking system, ensuring stability and trust in the financial environment. One of its main uses is in Real-Time Gross Settlement (RTGS) systems, where high-value transactions are settled in real-time, facilitating immediate and final transfers between banks.

Moreover, central bank money is also essential for Deferred Net Settlement (DNS) systems, which allow multiple transactions to be accumulated and settled at designated intervals. In these cases, banks use central bank money to balance their accounts after the net positions have been calculated, ensuring that all transactions are settled with the finality and security that central bank currency provides.

This dual functionality of central bank money enables both real-time and batch processing of payments, which is why it is accurate to state that it can be used for both RTGS payments and DNS balancing settlements.